Yugoslavia debates changes in wake of financial scandal

September 18, 1987

By Eric BourneSpecial to The Christian Science Monitor

Vienna

A massive scandal at one of Yugoslavia's biggest industrial enterprises has dealt a major blow to the credibility of the country's economic system. It may even prompt far-reaching constitutional changes. Agrokomerc, a state-farming firm in the central Yugoslav republic of Bosnia and Hercegovina, is under investigation for allegedly issuing at least $750 million in worthless unsecured promissory notes.

In the wake of the scandal, Hamdija Pozderac, Bosnia's representative on the Yugoslav state presidency, has resigned; Fikret Abdic, the company's director, and eight members of his management team are under arrest; and up to 100 more people are under investigation.

The threatened collapse of Agrokomerc, one of Yugoslavia's more ambitious industrial projects, will strengthen the hands of those pressing for a return to greater federal control in financial areas.

It could hasten passage of constitutional amendments being considered in parliament that would reduce the status and powers of the country's six republics in their economic relations with the central government. The near total autonomy that the 1974 Constitution bestowed on the republics (and two almost equally self-governing provinces) is seen as the major cause of the country's economic crisis.

Under the rotating federal presidential system, Mr. Pozderac was in line to become head of state next May. He has said he quit ``on principle,'' acknowledging his support for Agrokomerc's ``healthy'' programs but not those based on fictitious resources.

Pozderac's resignation remains controversial. But it marks a significant victory in a hard-hitting Yugoslav press campaign over public accountability of officials.

Despite frequent efforts to gag them, the news media have for years demanded that top figures in the government and the Communist Party accept responsibility for economic policies that have run up more than $20 billion in foreign debts, and brought three-figure inflation, 15 percent unemployment, and a dramatic decline in living standards that not so long ago were easily the best in the communist world.

Inevitably, the top figure under fire in the Agrokomerc affair is Branko Mikulic, the federal prime minister. He is an ardent protagonist of constitutional change to reestablish federal authority over the economy.

Mr. Mikulic made a considerable reputation as the able, albeit authoritarian, party chief in Bosnia and Hercegovina and as chief engineer behind its dramatic industrial takeoff into the 1980s and its highly acclaimed staging of the 1984 Olympics Winter Games.

In the last decade, the once scruffy Balkan town of Sarajevo has become a modern city of 400,000, and Bosnia itself is the ``boom'' republic, spawning some of Yugoslavia's most progressive and intensive concentrations of investment and development.

Some are agricultural-industrial complexes like Agrokomerc, which exports worldwide. Others are involved in electrical, automotive, and mechanical industries, oil refining and manufacturing processing. The show piece of all is Energoinvest, one of Yugoslavia's giants, with 22,000 workers and sales offices in 32 countries. All will come under scrutiny now.

Immediate losers in the scandal were the 63 apparently gullible banks that issued the notes to Agrokomerc. Many of the banks were founded by companies to provide financial services beyond federal control.

A new federal law has just come into effect, under which companies that are in the red must go bankrupt and close down. With neither local government nor Communist Party institutions willing to bail out even the still viable sections of the enterprise, the subsequent losers will be Agrokomerc's 13,000 employees. -30-{et